Court has spoken but pensions remain unsettled

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Detroit Legal News

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State still has to solve how to fund pensions

By Geoff MulvihillAssociated Press

TRENTON, N.J. (AP) - New Jersey's state Supreme Court ruled that it will not force the state to increase contributions to the pension funds for public workers, handing a court victory to Gov. Chris Christie as he considers whether to seek the Republican presidential nomination next year.

Tuesday's ruling takes away what could have been a contentious scramble in the last three weeks of the current fiscal year to rework the current budget and/or proposals for the one that kicks in July 1. But it doesn't solve the bigger issue of how the state can fulfill its obligation to fund workers' pensions.

Here's a look at what the ruling means for various parties.

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PUBLIC WORKERS

The court was clear that the state government still must pay retirees the pensions they have been promised.

But it says it will not dictate how much the state must contribute ahead of time to the funds from which the pensions are paid.

The funds are now solvent, but unions have warned that some will not have the money they need to pay annual costs within the next decade.

Without the court making mandates, it will be up to lawmakers, the governor and unions to work out the funding. Christie says he has a new plan that would make public workers' health plans less generous and use the savings to fund pensions. Existing defined-benefit pensions would be frozen under his plan, and workers would get new 401(k)-style plans. Unions and the Democrats who control the Legislature have not agreed to that concept.

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TAXPAYERS

A ruling in favor of the unions may have forced either tax increases or major cuts in state funding to other programs to pay for contributions. That's off the table for now.

But the costs of paying for pensions will grow more the longer more money isn't put into the funds. So delays would be expensive for taxpayers in the future.

On Tuesday, Moody's Investor Service released a statement making that prediction, saying the ruling is helpful in the short term. "However, long-term, this reinforces the state's ongoing reliance on one-time budget solutions and will perpetuate large structural imbalances and a rapidly increasing pension burden," Vice President and analyst Baye Larsen wrote.

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CHRISTIE

The ruling is a victory for Christie and means he does not have to pull apart the budget that ends June 30 or rework the one that he's proposed for the fiscal year that starts July 1.

It also appears to give him an advantage in negotiations with the Democratic-controlled Legislature and unions on the fate of pensions. Both Republican and Democratic lawmakers are calling for working something out, though state Senate President Steve Sweeney says he doesn't want to negotiate with Christie on this, saying the governor didn't hold up his part of the bargain before.

The ruling also returns the spotlights to New Jersey's financial troubles, something other presidential hopefuls are likely to note.